10 April 2017

Why Prince Charles needs a lesson in economics

By

It may not be surprising that a man who talks to tomatoes and uses homeopathy on cows has some funny ideas about standards of evidence.

But even by his own lights, Prince Charles’s opinions about economics, as relayed in Sally Bedell Smith’s new biography, are quite something.

In an extract in The Sunday Times (£), Bedell Smith describes how the Prince tends (like so many of us) to seek out “people who agree with him and buttress his instincts”, how he is hostile to new ideas and unwelcome advice. And she illustrates this with the following story:

“Charles found himself in conversation at a small dinner party with a writer known for his incisive analysis and wide-ranging intellect.

‘I suppose you are one of those people who believe in free trade,’ Charles said.

‘Yes sir,’ replied the man.

‘Have you ever been to Lagos?’ asked the prince. ‘It is simply frightful. People are living in the most appalling conditions and it is because of free trade.’

‘Sir,’ the man replied, ‘it is because of a lack of free trade.’”

At which point the hostess kicked him under the table, and the topic was dropped.

It’s hardly surprising that a man who never leaves home without his personal white leather loo seat –  who has his own martinis brought with him to parties in a special case, who owns a silver-plated porcupine-quill toothpick, who has his vegetables steamed in mineral water, who brings his own chef when he goes to stay with friends – is not entirely au fait with the world as the rest of us know it.

But the Prince’s distaste for capitalism – according to Bedell Smith, the worst thing he can think to say of Nicholas Ridley, as environment secretary, is that he is a “free-market kind of buccaneer” – matters for two reasons.

First, because disliking free trade is as serious an error as you can make. Free trade and free exchange are the two great building blocks of the entire economic system. They are the fundamental necessities for prosperity – for spreading the kind of luxury which the Prince is lucky enough to enjoy beyond a tiny gilded circle at the top of society. As Schumpeter pointed out, Queen Elizabeth I had silk stockings, but it took capitalism to bring them within reach of the factory girl.

And second, because the Prince is not alone. Too many well-meaning types in the West, particularly on the Left, do see the market either as a necessary evil or just plain evil. They can just about accept, from their comfortable armchairs, that it serves us well in the First World – though only so long as it is appropriately tamed and gentled. But it should certainly not be inflicted on the suffering innocents of the Third.

The irony is that many of these people are often those who are most concerned with poverty and suffering in the particular: Prince Charles, for example, has devoted much of his life to helping the underprivileged both at home and abroad. But when it comes to the aggregate, they lose perspective.

George W Bush famously spoke of “the soft bigotry of low expectations” – how poor or non-white students were left to rot because no one believed they could do better, no one taught them that they too could strive and rise.

What we have here is the soft bigotry of economic ignorance. The kind that, even while it decries imperialism, still clings to paternalism – to the idea that forcing others into our economic system has destroyed traditional ways of life. That we know better than the locals what is best for them, and that is certainly not trying to imitate our wasteful, consumerist, decadent Western lifestyles.

The problem with this way of thinking is that it is wrong. Not just wrong, but spectacularly so.

The defining feature of our world, as we often point out at CapX, is that it’s becoming startlingly better, startlingly quickly. As Johan Norberg observes, poverty worldwide has almost halved over the last 20 years – even if only a handful of people in the West (just 5 per cent in the US, for example) realise it.

One of the defining contributors to that increase in prosperity is, yes, free trade. Countries have been able to profit by becoming part of a global market, and global supply chains: think of Vietnam, or Bangaldesh. Ricardo’s principle of comparative advantage, playing out on a worldwide scale, has ensured that there is a niche for everyone to fill.

And it’s when you consider Africa in particular that you see quite how mutton-headed Prince Charles’s position really is.

As Daniel Knowles of the Economist argued on CapX last year, one of the continent’s greatest problems is – as HRH’s dining companion bravely pointed out – not enough free trade. Where Africa has prospered, it has done so by inserting itself into global markets. But trade within the continent, across borders, is still drastically underdeveloped, hampered by archaic regulation, shoddy infrastructure and dizzying corruption.

Nigeria is one of the worst offenders. As Daniel said, it is hampered by an over-dependence on oil exports – which has seen it become the worst kind of petro-state, with its prosperity lashed to the oil price.

Yet even despite this, even in a country where so many, many things have gone wrong, many things have also gone right.

Lagos itself, for example, is one of the world’s fastest-growing cities. Were it an independent country, its economy would be the seventh largest in Africa.

Since 1995, according to the World Bank’s datasets, the population of Lagos and of Nigeria’s other cities has grown from 34.9 million to 87 million. A country that was two thirds rural is now majority urban, and becoming more so.

Yet something else has happened during that period. The same datasets show that the proportion of those urbanites who are living in slums has fallen from 73.5 to 50.2 per cent – from three quarters to half.

So yes, Nigeria has more slum-dwellers today than it did city-dwellers in 1995. But the number of people living in cities but not in slums has multiplied fivefold.

It is not the only encouraging statistic. Income per head across Nigeria has more than tripled in real terms – from $1,840 per head in today’s money to $5,810. Even with the strains of the HIV/AIDS epidemic (the second largest in the world) the death rate has fallen from 18 per 1,000 per year to 13. The number of infant deaths has fallen by 11 per cent a year – although there is still much to be done. Mobile phone penetration has gone from 0 to 82 per 100 people. And while the country is still hideously unequal, the poorest 10 and 20 per cent of the population have both seen their share of national wealth increase, at the expense of the richest.

There is a semi-respectable intellectual position which holds that, while the market is a good thing, countries can be exposed to it too early – that limited protectionism is justified while they build up their economic capacity.

But there is no justification at all for the idea that Africa’s slum-dwellers exist because of free trade – that the best thing we can do for them is to shield them from the stormy winds of creative destruction so they can lead idyllic, pre-lapsarian lives as organic smallholders or traditional basketweavers.

Yes, it is appalling (to use His Royal Highness’s favoured expression) that millions of people, in Lagos and elsewhere, are living in slum conditions. But a snapshot is not a movie. People live in slums because it is better than the alternatives – and because they know there is a pathway out.

To understand this phenomenon, the Prince does not have to go back to Africa. He need only consider his friend John Latsis, the Greek shipping magnate whose 400ft luxury yacht provided transportation to the Orthodox monasteries of Mount Athos when the Prince wished to seclude himself from this fallen world.

Latsis started life as a deckhand, working his way up to captain and buying his first cargo vessel in 1938. He ended up a billionaire – due to his work in furthering the cause of free trade. A cause that might be a great deal less mystical than that of the monks who hosted Prince Charles, but which still deserves a full measure of veneration.

Robert Colvile is Editor of CapX. His book 'The Great Acceleration: How the World is Getting Faster, Faster' (Bloomsbury) is now out in paperback